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Financial Restrictions, Personal Income Tax (PIT) and Demand for a Permanent Home in a Dynamic Model. An analysis with Panel Data for Spain

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Author Info

  • Cesar Pérez-López

    (Universidad Complutense de Madrid)

  • Desiderio Romero-Jordan

    (Universidad Rey Juan Carlos)

  • José Felix Sanz-Sanz

    (Universidad Complutense de Madrid)

Abstract

This paper analyzes the way in which income tax and liquidity determine the purchase or rental of a permanent home in Spain. To do this, we have developed a theoretical dynamic model based on Euler’s equation. This model is verified using a sample from the 1991-1995 Panel of income taxpayers. Results suggest that the degree of financial restriction is the most relevant variable when determining the possibility of purchasing a home, while tax incentives increase their relative weighting once this asset has been acquired. Incentives for renting a home are relatively insignificant particularly for taxpayers who habitually rent their homes.

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File URL: http://128.118.178.162/eps/pe/papers/0407/0407005.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Public Economics with number 0407005.

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Length: 25 pages
Date of creation: 08 Jul 2004
Date of revision:
Handle: RePEc:wpa:wuwppe:0407005

Note: Type of Document - pdf; pages: 25
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Web page: http://128.118.178.162

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Keywords: personal income tax; liquidity; permanent home; tax incentives;

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  1. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
  2. Miguel Angel López García, 1992. "Algunos aspectos de la economía y la política de la vivienda," Investigaciones Economicas, Fundación SEPI, vol. 16(1), pages 3-41, January.
  3. Jorge Onrubia Fernández & Desiderio Romero Jordán & José Félix Sanz Sanz, . "Una Nota Sobre La Compensación De Incentivos A La Adquisición De Vivienda Habitual Tras La Reforma Del Irpf De 1998," Working Papers 34-02 Classification-JEL , Instituto de Estudios Fiscales.
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